Posted Sat Nov 25 20:43:00 EAT 2017

How to decide which shares to buy at stock market

By MUNGAI KIHANYA

In Summary

Now, every day, the Business Daily newspaper publishes a table showing important data about the companies listed on the NSE. It is titled “Daily Share Report.”

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Mary Wanyoike says that she has been planning to start investing in shares at the Nairobi Securities Exchange (NSE) but has not started because she doesn’t know which companies to buy. To her credit, she opened an account with one of the stock brokers “but it has remained dormant for so long.” Therefore, she asks: “I want to start with just Sh5,000. Which company can you recommend?”

Instead of giving an answer, I prefer to show Mary how to get it for herself – that is, teach her how to fish instead of giving her a fish. So here we go.

“Normal trades” at the NSE are done in blocks of 100 shares. If you want to buy less than 100, your order will be booked under “odd lots” and it can take a very long time to be executed.

Therefore, by dividing Sh5,000 by 100 shares, we find that the best choice for Mary should be those companies whose prices are Sh50 and below. There are about 50 companies in that category, including some very well-known ones like Equity Bank (Sh43), Safaricom (Sh28), Total Oil (Sh26), Barclays Bank (Sh10) etc.

After identifying the companies that are within her price range, the next step for Mary is to find out which among them are profitable.

Now, every day, the Business Daily newspaper publishes a table showing important data about the companies listed on the NSE. It is titled “Daily Share Report.”